General Business

Unit 1 – Economic RolesChapter 4Economic

Measurements

Book Time•Page 41

–Read aloud

Classwork•Hand-Out CW-4-1

–Individual work•Check if done•Review

Economic Growth•Steady increase in production in an economic system–High rate of employment

–Low rate of business failure

GDP•Gross Domestic Product–Total $ value of all final goods/services produced during 1 year•Measure of how economy is performing

GDP•3 major categories of expenditures–1. What consumers spend for food, clothing & housing

–2. What businesses spend for buildings, equipment & supplies

GDP•3 major categories (cntd.)–What government agencies spend to pay employees and to buy supplies

GDP•Doesn’t include:

–Value of work we do for selves•Mowing lawn•Cleaning house

? GDP ?•Why is the value of the work we do for ourselves not included as part of the GDP?

GDP•Includes only final goods•Intermediate goods not counted–Manufacturing goods

•Raw materials – steel, iron ore

GDP•End of 1990’s:

–GDP = >$8.5 trillion

•Comparison year to year–Prices must be adjusted to be “equal value”

Classwork•Hand-Out CW-4-2

–Individual Work•Check if done•Review

Base Year•Year chosen to compare an item / price, to another year

Constant Dollar GDP

•Value of GDP after removing effect of price changes–Also called “Real GDP or GDP in Real Terms”

Determine Real GDP for the Following years

YEAR

GDP PL INDEX in %

rGDP

1992

6318.9 91.8

1993

6642.3 94.0

1994

7054.3 96.0

1995

7400.5 98.1

1996.

7813.2 100.0

1997

8318.4 101.9

1998

8790.2 103.2

1999

9299.2 104.8

6883.3

7066.3

7348.2

7543.8

7813.2.

8163.3

8517.6

8873.3

GDP Per Capita•Output per person

–Divide GDP by total population•Increase = growing economy

•Decrease = economic trouble

Productivity Increase•Increase in goods/services from same # of workers–Improved quality of capital resources (equip.)

–Worker training–Management techniques

Classwork•CW-4-3

–Individual work•Check if done•Review

Business Cycle•Recurring ups & downs of GDP

•Movement of economy from 1 condition to another & back again

•Cyclical pattern

Business Cycle•4 phases

–Prosperity–Recession–Depression–Recovery

Prosperity•High point of cycle

–Want to work = job–Businesses produce record amounts

–Wages good–GDP grows

•Boom period

Recession•Economy slows

–Demand decreases–Businesses lower production

–Unemployment rises–GDP slows for 2+ qtrs.–Drop in related businesses

•Ripple effect

Depression•Recession deepens & spreads thru out country–Prolonged period of high unemployment

–Weak sales–Business failures–GDP falls rapidly

Depression•Great Depression

–1930-1940–25% of labor force unemployed•Couldn’t afford basic needs

Recovery•Nation moves into prosperity–Unemployment decreases–Increased demand for goods/services

–Businesses produce more

Inflation•Sustained increase in prices–Greater demand than supply•Prices rise faster than wages

•Pay higher prices

Inflation•Sustained increase (cntd.)

–Mild inflation (2-3%) stimulated economic growth•Companies sell goods higher prices, profits increase, hire more workers who then spend money in economy

Deflation•Decrease in prices

–Usually during recession or depression

–Prices lower, but people have less money to buy

Book Time•Read pg. 47

–Global Perspectives•Hyperinflation

•Answer 2 ?’s–Check if done–Review

Read•Chapter 4 – entire•Communicating for Success – pg. 51–Answer 2 ?’s

Study Guide•Pgs. 15-18

–Groups 2-3•Turn in 1 S.G. for group•Review in class

Computer Time•Web-Site:

–http://stats.bls.gov/•At a Glance Tables: right•U.S. Economy at a Glance: look at unemployment rates

•Go to: other avail. @ a glance

•Go to PA: look at data

The EndUnit 1

Chapter 4